Physician-Hospital Alignment Isn't Just About Playing Good Defense

Dennis Kennedy, for HealthLeaders Media, March 30, 2009

There are many good reasons to pursue better physician-hospital alignment, such as ensuring an adequate physician supply, enhancing service quality, improving customer service, and improving relationships among providers. When it comes to their position in the marketplace, hospitals often look at physician-hospital alignment as a defensive strategy—as a way not to lose their current referral base and market share. However, not only is physician-hospital alignment an essential strategy to improving market position, it is an imperative in these trying economic times that are impacting hospitals and physician practices alike.

Four steps will make sure physician-hospital alignment strategies lead to growth:

  1. Identify opportunities for improving market position
  2. Rigorously assess these opportunities
  3. Categorize and match real opportunities with the "right" physician-alignment strategy
  4. Implement and then monitor and report ongoing performance

Identify opportunities

Identifying opportunities might seem obvious, but many healthcare organizations do not systematically explore and identify opportunities to work with physicians to enhance the market performance of both parties. Leading healthcare organizations identify opportunities by combining a top-down and bottom-up approach.

In the top-down approach, hospital leadership uses market research and intelligence to seek out service line and/or geographic targets of opportunity. The foundation for physician-alignment strategies for many healthcare organizations is medical staff development planning. A good medical staff development plan will identify opportunities to grow by recruiting additional physicians (whether already in the community or new) to address insufficient market supply, enhance access, and/or enhance clinical capabilities. This top-down plan should be supported with traditional market planning analyses; e.g., demographic forecasts, market share trends, environmental changes, etc.

In the bottom-up approach, hospital leadership uses many of its physician-alignment vehicles—physician advisory councils, board representation, one-to-one communication efforts, etc.—to bring to light opportunities from the physicians themselves. One of the reasons to nurture good physician-hospital relationships and communication is so that physicians will come to the hospital first with new venture or technology opportunities to pursue jointly rather than to go to competitors or third parties.

Culturally, some organizations tend to be aggressive in pursuing opportunities, while others are somewhat reluctant. Though no organization needs to be constantly "wheeling and dealing," combining a top-down and bottom-up approach will in all likelihood uncover a steady stream of opportunities.

Assess opportunities

Not all opportunities are, in fact, growth opportunities. Neither do they all have the same potential. The first screen an opportunity must pass is consistency with the overall strategic direction of the organization. In our experience, very few not-for-profit healthcare organizations will pursue any opportunity that is not aligned with its mission just for the sake of growth. The next step is to assess opportunities by developing high-level business plans with market share and financial projections.

The following two key points need to be made regarding these assessments.

  • First, the organization must not fall victim to "analysis paralysis," particularly if working with physicians. Nothing frustrates physicians more than having administrators/planners study a concept they think is "hot" for months without deciding anything. If you wait for perfect information to make a decision, you'll wait a very long time.
  • Second, conclusions drawn from the results of the analyses should enable the organization to identify whether an opportunity will, in fact, lead to growth. Healthcare organizations have limited capital and energy to invest today just to maintain current operations and "keep the lights on." Only a potion of this financial capability can they afford to invest specifically for future growth. And the funds they do invest must produce a return. For example, the decision to employ a loyal physician who comes to the organization and wants to be employed might be important to protect existing volumes, but this decision should not be construed as one that will lead to growth.
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